It mentions Billy Durant, the exciting, visionary entrepreneur who raised goads of money and built GM from a disruptive startup in 1906 into a company with $10 billion (in today's dollars) in annual car sales by the early 1920's... but who was nonetheless fired by GM's board because, despite the company's rapid growth, it was burning cash and remained dependent on continued capital-raising. The board concluded GM needed someone who could execute a business model, not someone with grand visions who would perpetually need fresh capital to turn them into reality.
The parallels to Tesla's current situation are obvious.
The person who replaced Durant, Alfred P. Sloan Jr., ran GM for three decades with incredible success, turning it into the world's largest automaker.[a] This is the same Sloan as in the Alfred P. Sloan Foundation, MIT's Sloan School of Management, Stanford's Sloan program, and Sloan/Kettering Memorial Cancer Center. (Durant died poor, managing a bowling alley in Flint, Michigan.)
PS. The most interesting aspect of this article, for me, is the fact that it was written and published in the first place. It makes me wonder if the mindset of investors with regards to Tesla is changing from "show me an exciting vision" to "show me profitable execution of a business model."
The only problem I have with the GM analogy is that GM benefited greatly from WW2, not to mention the reconstruction years after it.
In fact GM has essentially even benefited form the German rearmament after the Nazi’s rose to power until essentially the US declaration of war or at least until the revenue payments from Opel stopped crossing the pond.
I am not sure how Tesla's current situation is obvious. There is more demand and not much on inventory. No one has a decent autopilot (Driver assist) close to Tesla and they have hardware ready for level 5 autonomy(or close to) . I feel this is the real luxury to have. They have largest fleet of vehicles passively collecting all the data to achieve self driving.
I am a huge Tesla fan (and Elon fan). I own stock (shortly after IPO). I have a model 3 reservation. I have been singing their praises for a long time. Elon is an incredible visionary and probably an incredible engineer. This is a great combination for making the impossible possible.
And I totally agree with this article. If not a new CEO, Tesla needs a good COO. They need excellent, consistent execution, not novel, groundbreaking execution. They have 100's of thousands of reservations for the 3 (and I don't know how many powerwall and solar roof reservations). If they can just execute on this, the world is theirs. But if they continue to have delays and major, public mistakes like the model 3 ramp, my stock purchase may have been a poor choice.
There will come a time when Musk needs to step away from Tesla, but that day is not today. He's publicly mused about stepping away (SpaceX is his real fav), but had his tenure renewed recently.
If all Tesla did was sell pretty good cars, they'd probably get crushed by the incumbents. Tesla, is selling way more than that - they're selling the idea of a brighter, better future. You're not just buying an EV, but you're helping climate change, you're reducing pollution, you'll be reducing human death and suffering and ending traffic jams and hey - it all comes in a exclusive, technologically-advanced, aesthetically pleasing package.
Now, some might object that this is largely a bunch of marketing/PR bullshit, and you will likely be technically correct, but would still miss the point. If people wanted a nice, efficient EV, they'd buy the Bolt, which by all accounts, is pretty damn good. But Tesla sells this "bullshit" because it's what people actually want to buy, and EVs happen to be the delivery vehicle. So as much as you might dislike this "bullshit", it's a core reason why Tesla even exists in 2018.
Where does Musk fit into this? He happens to be the personification of this idea today. In the popular mind he is "cool" so when you buy a Tesla, you're also implicitly buying part of this cool, much like buying an iPhone back in the day got you a part of Jobs' cool. Eventually Tesla will become it's own thing (as Apple is today) and outgrow Musk, but that's still years away.
OTOH, if you want to know what's actually going on at Tesla and what they need, this will probably give you the best idea out of any material on the internet:
It's an in-depth interview with a guy who owns a consultancy which disassembles, analyses and sells reports on vehicles, both for manufacturers looking for research on their competitors and at improving their own products. His findings are extremely interesting - he's downright astounded at how incredible parts of the car are (battery, electronics) and thinks established companies should be quacking in their boots. OTOH, he thinks they've made a number of blunders in other parts, such as their production line design or parts of the car (for example, he thinks the body is 20-25% heavier than it needs to be, with parts that serve no discernable purpose)
That's not the only issue they face. Tesla is on a downward spiral and can't make money off a 35k base model. They owe a lot of money to creditors and all it takes is for one of them to recall the debt owed and other creditors will follow. I'd strongly suggest reading this article:
They only have delays from their CEO's promises. Had he set expectations more realistically the stock might not be such a roller coaster and deposit holders would have had more accurate estimates.
If you eliminate every time table Musk has said and evaluate Tesla only what they've done so far, which is a simple Model 3 ramp up from scratch, perhaps they look more impressive.
In that vein there are many people who believe Apple’s* most important hire was not Jony Ive but Tim Cook. Tim built the machine that allowed for the type of manufacturing and logistics execution you see at Apple today.
* I say Apple’s hire because Jony joined during Steve’s gap in tenure
He intends to step away from Tesla, but he doesn't think now is the right time. His vision and leadership are necessary to get Tesla to the point where the Model 3 has taken off -- after that, he'll hand over the reigns and focus on other stuff (SpaceX, Neuralink).
As long as Elon is learning, increasing his understanding, and implementing improvements to these systems and efficiencies - and he does publicly discuss these fairly often - then they'll be fine.
My biggest takeaway from this article is that Tesla's very aggressive, forward-looking growth plan could be absolutely destroyed by a recession in the US economy.
Durant's companies ran fine with him as CEO until recession hit and he ran out of money.
What happens to Tesla if a recession hits? All of their products, while undoubtedly groundbreaking, are luxury goods purchased with discretionary income. Even the Model 3 - reliable, commodity transportation can be had for far less than $35,000.
How will Tesla handle the pool of buyers for a $75,000 sedan and $900/mo lessees shrinking dramatically?
Of course all auto manufacturers face this problem. But a company run by an aggressive, visionary CEO like Musk faces far more risk.
My takeaway building on yours is that Tesla could survive but Elon Musk would be booted out in a recession.
Lets not forget that Tesla has impressive IPs wanted by generally most car companies and very well-trained staff, factories and huge customer demand (over-subscribing their orders) so if Tesla was to be sold for cheap in a recessionary period, any car company would raise money to buy Tesla.
Tesla did experience a recession in the early years of the company when trying to raise money and sell prototype visions. It nearly crushed the company but they came out on the other side. Today they're much better capitalized and Elon structured debt specifically to guard against dips in the economy.
Not saying he can't be wiped out with one or two bad decisions + a recession, but this isn't new territory for Tesla.
> All of their products, while undoubtedly groundbreaking
But that's not true. None of their products are groundbreaking. It's all decades old battery tech. What was revolutionary was musk's ability to brand old tech as new/hip and get the government to bail out and subsidize Tesla.
What tesla is great at is marketing and attaining government funding. Just like solar city.
> How will Tesla handle the pool of buyers for a $75,000 sedan and $900/mo lessees shrinking dramatically?
People forget that we've already seen this movie before with TSLA. It was saved from bankruptcy by Obama. I doubt Trump will come to Musk's rescue.
Also, TSLA's biggest problem isn't a recession. Just like solar city's biggest problem wasn't a recession. It's low energy prices and removal of favorable government policies along with our love of large vehicles.
TSLA might be doing well in norway, but it's just a blip in the rest of europe, north america and china. It's a testament to musk that he is able to keep such a marginal and ineffective company in the spotlight day after day. The guy is truly one of the great marketers of our time.
Solar installations (via SolarCity acquisition) should ramp up during recession if they still provide cost savings to consumers compared to utility rates.
Semi trucks are also a product line that at scale should be able to deliver savings to large delivery fleets.
Unless it's a global recession, I imagine they'll be able to find money.
Also, Tesla and Elon aren't just an electric vehicle company and a founder of a single company either, and this might give him the credibility and belief in him for a recession to be moot.
GM had inventory >> demand, Tesla has demand >> inventory. Durant micro-managed; Musk both has obvious tendencies there, but also just broadcast a memo directing employees communicate directly, without going up and down a chain of command. And, as noted in other comments, Musk took over the company from its founders — like Sloan, and unlike Durant.
There’s ingredients here for a Tesla:GM and Musk:Durant story, or for its opposite.
To make the argument compelling, I’d want a justification for including only the similarities while omitting these differences. Without this, the comparison seems ad hoc.
Great storytelling, but it concludes rather abruptly. An argument of analogy and anecdote. Further, Musk is not the founder of Tesla, Martin Eberhard and Marc Tarpenning are.
Wikipedia has five people listed, and says that while it was registered by those two, they consider the rest as co-founders. Now, Wikipedia isn't the greatest source, but it seems to be consistent with most media coverage.
There's a fine line between learning lessons from history and assuming that a lesson from history will inevitably happen again in the future. People, companies and life have elements of chaos and luck that have so far made consistent, accurate future predictions unreliable.
People are good at identifying patterns, but we sometimes make the mistake of predicting the future based on past patterns. A classic example is the stock market where no one has reliably predicted the future without insider information.
So, yeah it's good to know the history of GM, but let's be careful about projecting that onto Tesla.
A better comparison to Durant's amazing entrepreneurship as auto manufacturing scaled would be Steve Jobs.
Very similar situation to Durant, fired by Apple (who ironically were trying to impose sloan style metrics on everything) comes back and builds the biggest consumer brand on the planet. Look at Apple now, it's sliding back into mid management mediocrity...
I'm not a Musk fan particularly but slowing down innovation and sizzle at this point in their scary journey would be a disaster IMO
Billy Durant was a bad ass. My father told me a story he heard from someone who was in the room. Durant crashes a GM board meeting and is told he has no standing and must leave.
He starts toward the door, says something and in file a series of Western Union boys who bring in bags of telegrams which at Durant's direction they empty on the board table.
Durant announces to the stunned board that these telegrams give me voting control of General Motors and it is you who have to leave - and they did!
I'm just surprised that no one has ever done a movie about him.
This is conventional B-school wisdom (where B = biology or business): the most successful adaptations are enabled by new DNA. In business, firms that grow from one of many to leading firms must adapt because leading firms face different threats, of which, celebrity CEO may nowadays be the biggest.
He has scoffed at the Toyota Production System, so while I agree with you, I find this unlikely to happen. He seems to be backing into it with comments like "humans are underrated" since I would imagine his ego can't allow a backtrack any faster.
[+] [-] cs702|8 years ago|reply
It mentions Billy Durant, the exciting, visionary entrepreneur who raised goads of money and built GM from a disruptive startup in 1906 into a company with $10 billion (in today's dollars) in annual car sales by the early 1920's... but who was nonetheless fired by GM's board because, despite the company's rapid growth, it was burning cash and remained dependent on continued capital-raising. The board concluded GM needed someone who could execute a business model, not someone with grand visions who would perpetually need fresh capital to turn them into reality.
The parallels to Tesla's current situation are obvious.
The person who replaced Durant, Alfred P. Sloan Jr., ran GM for three decades with incredible success, turning it into the world's largest automaker.[a] This is the same Sloan as in the Alfred P. Sloan Foundation, MIT's Sloan School of Management, Stanford's Sloan program, and Sloan/Kettering Memorial Cancer Center. (Durant died poor, managing a bowling alley in Flint, Michigan.)
PS. The most interesting aspect of this article, for me, is the fact that it was written and published in the first place. It makes me wonder if the mindset of investors with regards to Tesla is changing from "show me an exciting vision" to "show me profitable execution of a business model."
[a] https://en.wikipedia.org/wiki/Alfred_P._Sloan
[+] [-] dogma1138|8 years ago|reply
[+] [-] sabareesh|8 years ago|reply
[+] [-] thewopr|8 years ago|reply
And I totally agree with this article. If not a new CEO, Tesla needs a good COO. They need excellent, consistent execution, not novel, groundbreaking execution. They have 100's of thousands of reservations for the 3 (and I don't know how many powerwall and solar roof reservations). If they can just execute on this, the world is theirs. But if they continue to have delays and major, public mistakes like the model 3 ramp, my stock purchase may have been a poor choice.
[+] [-] martythemaniak|8 years ago|reply
If all Tesla did was sell pretty good cars, they'd probably get crushed by the incumbents. Tesla, is selling way more than that - they're selling the idea of a brighter, better future. You're not just buying an EV, but you're helping climate change, you're reducing pollution, you'll be reducing human death and suffering and ending traffic jams and hey - it all comes in a exclusive, technologically-advanced, aesthetically pleasing package.
Now, some might object that this is largely a bunch of marketing/PR bullshit, and you will likely be technically correct, but would still miss the point. If people wanted a nice, efficient EV, they'd buy the Bolt, which by all accounts, is pretty damn good. But Tesla sells this "bullshit" because it's what people actually want to buy, and EVs happen to be the delivery vehicle. So as much as you might dislike this "bullshit", it's a core reason why Tesla even exists in 2018.
Where does Musk fit into this? He happens to be the personification of this idea today. In the popular mind he is "cool" so when you buy a Tesla, you're also implicitly buying part of this cool, much like buying an iPhone back in the day got you a part of Jobs' cool. Eventually Tesla will become it's own thing (as Apple is today) and outgrow Musk, but that's still years away.
OTOH, if you want to know what's actually going on at Tesla and what they need, this will probably give you the best idea out of any material on the internet:
https://www.youtube.com/watch?v=CpCrkO1x-Qo
It's an in-depth interview with a guy who owns a consultancy which disassembles, analyses and sells reports on vehicles, both for manufacturers looking for research on their competitors and at improving their own products. His findings are extremely interesting - he's downright astounded at how incredible parts of the car are (battery, electronics) and thinks established companies should be quacking in their boots. OTOH, he thinks they've made a number of blunders in other parts, such as their production line design or parts of the car (for example, he thinks the body is 20-25% heavier than it needs to be, with parts that serve no discernable purpose)
[+] [-] lechiffre10|8 years ago|reply
https://www.zerohedge.com/news/2018-04-19/more-hilarious-fac...
[+] [-] carlivar|8 years ago|reply
If you eliminate every time table Musk has said and evaluate Tesla only what they've done so far, which is a simple Model 3 ramp up from scratch, perhaps they look more impressive.
[+] [-] unknown|8 years ago|reply
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[+] [-] ryanmarsh|8 years ago|reply
* I say Apple’s hire because Jony joined during Steve’s gap in tenure
[+] [-] paladin314159|8 years ago|reply
[+] [-] loceng|8 years ago|reply
[+] [-] unknown|8 years ago|reply
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[+] [-] shanghaiaway|8 years ago|reply
[+] [-] bkjelden|8 years ago|reply
Durant's companies ran fine with him as CEO until recession hit and he ran out of money.
What happens to Tesla if a recession hits? All of their products, while undoubtedly groundbreaking, are luxury goods purchased with discretionary income. Even the Model 3 - reliable, commodity transportation can be had for far less than $35,000.
How will Tesla handle the pool of buyers for a $75,000 sedan and $900/mo lessees shrinking dramatically?
Of course all auto manufacturers face this problem. But a company run by an aggressive, visionary CEO like Musk faces far more risk.
[+] [-] icebraining|8 years ago|reply
[+] [-] forkLding|8 years ago|reply
Lets not forget that Tesla has impressive IPs wanted by generally most car companies and very well-trained staff, factories and huge customer demand (over-subscribing their orders) so if Tesla was to be sold for cheap in a recessionary period, any car company would raise money to buy Tesla.
[+] [-] icelancer|8 years ago|reply
Not saying he can't be wiped out with one or two bad decisions + a recession, but this isn't new territory for Tesla.
[+] [-] prmths|8 years ago|reply
But that's not true. None of their products are groundbreaking. It's all decades old battery tech. What was revolutionary was musk's ability to brand old tech as new/hip and get the government to bail out and subsidize Tesla.
What tesla is great at is marketing and attaining government funding. Just like solar city.
> How will Tesla handle the pool of buyers for a $75,000 sedan and $900/mo lessees shrinking dramatically?
It'll go bankrupt or get a bailout.
https://techcrunch.com/2009/06/23/the-government-comes-throu...
People forget that we've already seen this movie before with TSLA. It was saved from bankruptcy by Obama. I doubt Trump will come to Musk's rescue.
Also, TSLA's biggest problem isn't a recession. Just like solar city's biggest problem wasn't a recession. It's low energy prices and removal of favorable government policies along with our love of large vehicles.
http://6abc.com/automotive/ford-getting-rid-of-all-its-cars-...
TSLA might be doing well in norway, but it's just a blip in the rest of europe, north america and china. It's a testament to musk that he is able to keep such a marginal and ineffective company in the spotlight day after day. The guy is truly one of the great marketers of our time.
[+] [-] prostoalex|8 years ago|reply
Solar installations (via SolarCity acquisition) should ramp up during recession if they still provide cost savings to consumers compared to utility rates.
Semi trucks are also a product line that at scale should be able to deliver savings to large delivery fleets.
[+] [-] loceng|8 years ago|reply
Also, Tesla and Elon aren't just an electric vehicle company and a founder of a single company either, and this might give him the credibility and belief in him for a recession to be moot.
[+] [-] osteele|8 years ago|reply
There’s ingredients here for a Tesla:GM and Musk:Durant story, or for its opposite.
To make the argument compelling, I’d want a justification for including only the similarities while omitting these differences. Without this, the comparison seems ad hoc.
[+] [-] bagrow|8 years ago|reply
[+] [-] Mononokay|8 years ago|reply
[+] [-] flyingcircus3|8 years ago|reply
I can do the same for my Alma Mater, Purdue University.
First CS department in the US.
More astronauts than any other university. Some of the greatest names in aviation history: Armstrong, Cernan, Sullenberger, etc.
Tuition has been frozen for the last seven years, and they still print money.
Students from every nation on Earth.
It turns out, if you can last 150 years, good stuff eventually happens. If you can last 400 years, triply so.
[+] [-] everdev|8 years ago|reply
People are good at identifying patterns, but we sometimes make the mistake of predicting the future based on past patterns. A classic example is the stock market where no one has reliably predicted the future without insider information.
So, yeah it's good to know the history of GM, but let's be careful about projecting that onto Tesla.
[+] [-] joobus|8 years ago|reply
https://en.m.wikipedia.org/wiki/DeLorean_Motor_Company
[+] [-] rasz|8 years ago|reply
[+] [-] olivermarks|8 years ago|reply
Very similar situation to Durant, fired by Apple (who ironically were trying to impose sloan style metrics on everything) comes back and builds the biggest consumer brand on the planet. Look at Apple now, it's sliding back into mid management mediocrity...
I'm not a Musk fan particularly but slowing down innovation and sizzle at this point in their scary journey would be a disaster IMO
[+] [-] rmason|8 years ago|reply
He starts toward the door, says something and in file a series of Western Union boys who bring in bags of telegrams which at Durant's direction they empty on the board table.
Durant announces to the stunned board that these telegrams give me voting control of General Motors and it is you who have to leave - and they did!
I'm just surprised that no one has ever done a movie about him.
[+] [-] lucas_membrane|8 years ago|reply
[+] [-] csours|8 years ago|reply
[+] [-] doomlaser|8 years ago|reply
[+] [-] carlivar|8 years ago|reply
[+] [-] Proven|8 years ago|reply
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